Commission Splits in Real Estate Transactions

Xun Bian (), Bennie D. Waller () and Abdullah Yavas ()
Additional contact information
Xun Bian: Longwood University
Bennie D. Waller: Longwood University

The Journal of Real Estate Finance and Economics, 2017, vol. 54, issue 2, No 2, 165-187

Abstract: Abstract We examine commission splits between listing and selling agents in real estate transactions. We construct a theoretical model to show that agency problems arise when a listing agent attempts to maximize his or her payoff while setting the commission split. Mitigation to these agency problems can be achieved through the imposition of a limited duration on listing contracts. Our model produces several testable hypotheses, which are supported by empirical evidence. We find property listings with higher list prices and quick sales are associated with lower commission splits. Commission split is more likely to be higher when the listed property has a high degree of atypicality and/or is overpriced. Additionally, agent-owned properties pay higher commission splits.

Keywords: Agency theory; Residential brokerage; Commission splits; Dual agency (search for similar items in EconPapers)
JEL-codes: D8 J4 K12 L0 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11146-015-9541-0

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